11 Nov 2008

Stocks surge after China stimulus

6:19 am on 11 November 2008

Asian markets rose sharply after China announced a 4 trillion yuan ($US586 billion) investment plan to kick-start its slowing economy.

Stocks leapt in Japan, China and Hong Kong, buoyed by China's efforts to sustain its growth rates, on which many Asian economies depend.

About $US586 billion is to be invested in housing, infrastructure and post-earthquake reconstruction in China over the next two years.

Correspondents say the package is a response to falling growth and exports.

There will also be significant cuts in company tax, while banks will be allowed to lend more to projects involving rural development and technical innovation.

The government also promised a shift to a "moderately easy" monetary policy.

After a meeting of the Group of 20 finance officials in Sao Paulo, Brazil, International Monetary Fund managing director Dominique Strauss-Kahn said the package would have lot of influence on the Chinese economy and the world economy.

President Hu Jintao is to travel to Washington later this week for a global economic summit meeting.

Indexes up

Stocks in China rose sharply, with the Shanghai Composite Index ending 7.3% higher at 1,874.80.

In Tokyo, the Nikkei 225 stock average closed up 5.8% to 9,081.43, helped by the weaker yen. The Hang Seng Index in Hong Kong was up 3.39% at 14,726.59.

European and US stocks were also given a lift by the announcement.

The FTSE 100 index was up 2.2% to 4,455 in afternoon trading in London and the Dow Jones gained 2% to 9,120 in early exchanges on Wall Street.